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Friday, April 28, 2017

House prices fall again

Nationwide's House Price Index for April 2017 records another fall in house prices.

house prices nationwide april17

Robert Gardner, Nationwide's, Robert Gardner comments  :

“House prices recorded their second consecutive monthly fall in April, while the annual rate of growth slowed to 2.6%, the weakest since June 2013.

In some respects, the softening in house price growth is surprising because the unemployment rate is near to a 40- year low, confidence is still relatively high and mortgage rates have fallen to new all-time lows in recent months.

While monthly figures can be volatile, the recent softening in price growth may be a further indication that households are starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country.

Various data suggest that the latest slowdown in house prices may be part of a broader trend. Retail sales growth has slowed markedly in recent months, from a 14-year high of 7.3% in October, to 3.7% in February and 1.7% in March.

Household budgets are coming under pressure, as wage growth has moderated and inflation has accelerated. The household saving ratio, which measures how much incomegoes unspent each quarter, fell to an all-time low of 3.3% in Q4 on data extending back to 1963.

There may also be more fundamental reasons for the slowdown. House price growth has been outstripping earnings growth for a sustained period of time, steadily eroding affordability on a number of metrics. For example, the typical house price is currently 6.1 times average earnings, well above the long run average of 4.3 times earnings, and close to the all-time high of 6.4 times recorded in 2007. "

“Moreover, even though mortgage interest rates have touched new lows in recent months, the cost of servicing a typical mortgage is only just in line with long run average, and above long run averages in London and parts of the South of England."'s Russell Quirk, comments:

"A further drop in property values certainly seems out of the ordinary for this peak time of year and is almost certainly being influenced by the decision to call a snap election.

The market had shown promising signs of picking up after months of uncertainty caused by the lead up to Article 50 being triggered. But it would seem this latest cat amongst the pigeons has once again caused an unseasonal freeze amongst UK buyers and sellers.

It is likely that this initial drop will be due to a snap election aftershock reverberating across the UK property sector and causing an almost immediate decline in price growth. But the heightened buyer demand that comes with this time of year should soon reverse this, if not before June, then immediately after the election dust has settled."

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